How IoT Is Changing the Face of Retail

A look at the emerging IoT-inspired trends in retail and what the next year holds

Scarlett Evans

December 19, 2022

6 Min Read
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Across industries, technology has proven transformative in boosting efficiencies while reducing costs and streamlining operations. From smart devices for in-store analytics and asset tracking to augmented reality devices to help customers visualize products, engineers are developing increasingly innovative tools to drive customer engagement, improve user experience and ease ongoing pressure on overworked staff. Here are some of the main trends seen across IoT in retail, and what the future holds for this sector.

The Rise of Digitalization in Retail

The apparel and retail industry has gone through enormous change since the pandemic and IoT investment has been slowly but steadily ramping up, gradually shifting traditional shopper experiences to remote, yet more interactive and personalized models. 

Eleftheria Kouri, senior IoT analyst at Omdia, says the push toward e-commerce platforms and online shopping services rapidly accelerated during the pandemic as businesses scrambled to maintain buyer interest, and it is a trend that has only expanded in the “after Covid arena.” 

“Consumers value the convenience and personalized options offered through online shopping,” she said. “During the pandemic, many retailers further optimized their online store experience by adding interactive features that remind users of in-store shopping, such as AR for virtually trying on products or live streaming shopping directly from a store with the guidance of a personal shopper.” 

Efforts to automate retail have been bolstered by rising labor costs and ongoing disruptions from the pandemic, with minimizing costs while maintaining high production output as the impetus behind many tech advancements in the sector. 

While these knock-on effects from the pandemic are not unique to retail, the change in consumer habits and businesses’ need to adapt accordingly is felt particularly keenly in this sector. Now, with a cost of living crisis spreading across Europe and rising inflation rates causing a squeeze on global economies, retailers will have to adjust once more to survive. 

Current Trends

The novel demand for a contactless experience, as well as the rise of online shopping, has driven investment into digital tools, while a bid to drive interest and cater to an increasingly tech-savvy market has shifted businesses’ focus to launching innovative products and services.

“There is no doubt that IoT and other emerging technologies have revolutionized the retail and fashion industry over the last years, bringing new tools and capabilities both to consumers and enterprises,” said Kouri. “More specifically, IoT is an important tool that assists businesses in the retail sector to collect important data in order to better understand customer’s shopping patterns and offer more personalized experiences and services.”

The increased popularity and declining cost of IoT hardware also make investment in these technologies more viable for small- and medium-sized businesses, positively influencing the market. 

“Retailers that aim to drive in-store traffic should invest in technologies that offer frictionless and personalized shopping experiences,” Kouri added. “For instance, AR mirrors, interactive screens, smart shelves, sensors for in-store traffic, and a variety of payments.”

In keeping with this bid to attract this changing model of shoppers, the primary emerging technologies in the retail sector include in-store analytics, smart shelves and AR.

IoT sensors installed in physical stores work to collect data regarding customer behavior, demographics and traffic in real time, with this data used to inform marketing and sales strategies. Similarly, smart shelves collect data on stock levels and popular products, with one example seen in Walmart Canada identifying popular products and adapting restocking patterns accordingly. In-store robots can automate tasks like inventory management, as well as stock replenishment, cleaning or even operating as shop assistants.

The rising popularity of these technologies can be seen from their increased presence at National Retail Association (NRA) conferences and showcases in the past year; from asset-tracking sensor tech to an interactive, AI-enabled smart mirror from MySize that scans a users body to offer them a “try-on” virtual experience and recommend items based on a shopper’s preferences. 

Kouri singles out AR as one of the “killer tech applications” seen in retail, increasing customer engagement and helping make the shopping experience more helpful at a time when consumers are increasingly reluctant to venture to brick-and-mortar stores. 

“AR apps allow consumers to interact with products and visualize how they may look in reality,” she said. “There are some retailers that have brought this technology to physical stores, for example, the cosmetic brand Sephora has brought smart mirrors at some physical stores that allow customers to virtually try products before purchasing them.”

Looking Forward

Looking at the year ahead, IoT in retail is only doing to see higher adoption and investment rates. According to Kouri, we will see medium- and small-scale businesses deploying emerging technologies such as computer vision, AI and data analytics as these digital tools become increasingly cost-effective and easily accessible. By leveraging the data collected, these businesses will also see more tailored marketing and communications campaigns, replacing the more conventional mass strategies.

At the same time, Kouri says technology vendors will adapt their offerings to make these emerging technologies more accessible for players in the retail sector. 

“Technology vendors (like Microsoft or Qualcomm) will play an important role in driving and democratizing emerging technologies in the retail sector,” she said. “[They will] develop more simplified, tailored and affordable solutions for the retail businesses that not only target large multinational enterprises but also small- and medium-sized businesses.”

New payment methods are also expected to emerge as technologies like IoT, blockchain and computer vision introduce new payment methods such as cashierless stores. As consumers and stakeholders alike increasingly push for sustainable business practices, IoT devices will be deployed to drive transparency and energy efficiencies. 

“IoT sensors will play an important role in managing energy consumption in physical stores, more specifically retailers will be able to use IoT sensors to ensure that energy consumption is maintained at optimum levels,” Kouri said. 

Last but not least, Kouri highlights the rise of the metaverse market in opening up new possibilities and trends in the retail sector. 

“The metaverse will unlock numerous new experiences and revenue opportunities in the retail and fashion sector,” she said. “Already several brands are exploring the new capabilities that metaverse brings, for example, Kate Spade invited customers in a metaverse app to interact and buy its latest bag collection.”

While the digitization of the retail sector has enabled significant opportunities for growth, another segment anticipated to see increased investment is data security. With the integration of numerous devices, retailers open their businesses up to potential infiltration and even something as seemingly innocuous as self-checkouts and their associated payment platforms can be a vulnerable point that bad actors could take advantage of. As such, alongside the rise of these device deployments, the industry will see rising interest in data security solutions.

IoT is a driving factor in the changing landscape of retail, and as technologies continue to get more accurate and efficient, we can expect to see the sector lean more heavily on personalized, remote shopping experiences that bring stores and their products into the homes of the consumer.

About the Author(s)

Scarlett Evans

Assistant Editor, IoT World Today

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